Sembcorp launches sustainability-linked bond, raises S$675 mn for Asian mkt

Global energy major Sembcorp launched its first Sustainability linked Bonds (SLB) and raised S$675 million. The company it is the first and largest such issuance in the Southeast Asia. 

This also marks the latest phase in the transition to a net-zero future by the company, Sembcorp said in a statement. The SLB issuance was anchored by IFC with an investment of S$150 million. This is the first SLB investment by IFC. 

Unlike traditional green bonds, SLBs involve issuers pledging to improve their performance against tailor-made ESG (environmental, social and governance) targets.

"Sembcorp, through its wholly-owned subsidiary Sembcorp Financial Services Pte. Ltd., priced its inaugural SLB today anchored by an investment of S$150 million from IFC. It also marks IFC’s first investment globally as an investor in a SLB, with the partnership between Sembcorp and IFC set to support more inclusive economic growth and private sector participation, while fostering sustainable business practices and significant employment opportunities" the company said in a statement. 

The ten-and-a-half-year Singapore dollar bond was at a coupon rate of 2.66 per cent. 

The company said net proceeds from the SLB will be used for the purposes of financing the general corporate working capital requirements of Sembcorp and its subsidiaries (Group), refinancing the Group’s existing debt and/or financing or refinancing of the Group’s renewable energy, or potentially, other sustainable projects. 

Sembcorp has more than 3.3 gigawatts (GW) of renewable energy capacity comprising solar, wind and energy storage solutions in key markets such as Singapore, China, India, UK and Vietnam, with a target to quadruple its installed renewable energy capacity to 10GW by 2025 from 2.6GW in 2020.

Wong Kim Yin, Group President & CEO of Sembcorp Industries said, “The issuance of our inaugural SLB underscores this commitment. We are heartened that IFC has chosen our issuance to be its first investment in a SLB globally. Their support validates our strategy and spurs us on in our drive toward supporting the global energy transition and a low-carbon economy.”

Sembcorp in May this year announced plans to expand the profit contribution from its sustainable solutions portfolio to 70 per cent (from 40 per cent) by 2025. 

It aims to achieve a compound annual growth rate (CAGR) of 30 per cent; its integrated urban solutions portfolio a CAGR of 10 per cent. 

By 2025, Sembcorp is aiming to have a gross installed renewable energy capacity of 10 gigawatt (Gw). Its current installed renewable energy capacity (comprising wind, solar, and energy storage) is 2.6 Gw. 

Besides China and Southeast Asia, the company is placing its bet on India to drive growth. 

Speaking with Business Standard, Vipul Tuli, chief executive officer-South Asia, Sembcorp Industries, had said India will be a significant contributor. 

"India is two-third of the global renewable portfolio today. There will be three markets that will grow - India, China, and Southeast Asia. While the percentage share of India might decline, in absolute numbers, it will grow substantially," said Tuli.